While 2020 was supposed to be my first year of official retirement, I made a decision to ride out some "low hanging fruit" business which has produced more than enough income for 2020. Starting in 2021, while I suspect I will have some earned income, I may be officially "landing the plane" and start at least a partial withdrawal. I have added the NewRetirement Personal Planner to my tool box which has given me a pretty good visual of potential withdrawal strategies and tax implications (using current info and my conservative return assumptions). In my case, 1/2 my investments are in after tax accounts which I could ride out until RMDs hit, minimizing my taxes up until then, after which I will get clobbered by Uncle Sam. My thought was to withdrawal from my 401K up to a specific tax bracket filling in the rest with after tax $$. I know many of you move say 1 yrs income into a high yield savings account at the beginning of the year for your expenses, but I am wondering if that makes the most sense if I want to implement my strategy? I am thinking I might need to take the following steps...
1) Turn off dividend re-invest in after tax accounts and estimate the naturally occurring dividends/interest/fund capital gains at the beginning of the year based on current balances/holdings/previous year distributions, noting the tax treatment (i.e. qualified/non-qualified).
2) Instead of plowing 1 yrs of expenses in cash, pull certain amounts from after tax and tax deferred accounts noting tax implications as I move through the year.
3) In December, when I have a better view of how month's 1-11 withdrawals are taxed, make final withdrawals from selected accounts to hit my desired tax threshold (effectively true-up my income to my taxable target).
I am planning for some larger annual withdrawals so ACA is not in my plan and right now Roth conversions really are not (may relook at those on a year by year basis).
How are you managing your tax brackets with your withdrawals (if you are)?
1) Turn off dividend re-invest in after tax accounts and estimate the naturally occurring dividends/interest/fund capital gains at the beginning of the year based on current balances/holdings/previous year distributions, noting the tax treatment (i.e. qualified/non-qualified).
2) Instead of plowing 1 yrs of expenses in cash, pull certain amounts from after tax and tax deferred accounts noting tax implications as I move through the year.
3) In December, when I have a better view of how month's 1-11 withdrawals are taxed, make final withdrawals from selected accounts to hit my desired tax threshold (effectively true-up my income to my taxable target).
I am planning for some larger annual withdrawals so ACA is not in my plan and right now Roth conversions really are not (may relook at those on a year by year basis).
How are you managing your tax brackets with your withdrawals (if you are)?